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What is Trade Finance?

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This specialised area of banking involves a unique set of financing options used by businesses to facilitate the movement of goods and services. While not limited to international trade, the products are commonly associated with the movement of goods between countries.

Republic offers specialised Trade Finance products and services focused to customers both locally and internationally. These products are extended by way of lines of credit denominated in USD or Euro currencies and include the following:

When You Use It!When foreign suppliers insist on a guarantee of payment before processing orders or shipping goods.

What It Is And How It Works!Documentary Letters of Credit are used as conditional guarantees of payment made by the Bank (the issuing Bank) to the supplier. They are conditional in that they guarantee payment only if specified conditions are met.

These conditions or 'terms of credit' are usually agreed by both the supplier (exporter) and the importer and involve documents which must be provided with the shipment. These include:- Bills of Exchange, Bills of Lading or Air Waybills, Commercial or Caricom Invoices, Insurance Certificates, Packing Lists, Inspection Certificates, etc.

Once the exporter ships the goods, he presents documents to the paying bank for settlement in accordance with the terms of the credit.

Letters of Credit are usually irrevocable which means that the terms cannot be changed without agreement by the importer and the exporter. This assures the importer that the goods shipped will be in accordance with what was ordered and it assures the exporter that payment will be received once he has complied with the terms of the credit.

Where a confirmed Letter of Credit is requested, the issuing Bank requests its correspondent Bank in the exporter's country to guarantee the credit.

It should be noted that banks deal only with documents. Therefore, if the importer is not satisfied with the goods shipped, recourse is only through the exporter or the insurers.

When You Use It!Importers who are required to pay in advance or on sight of shipping documents and do not want to burden cash flow and working capital arrangements, can gain access to funds by having suppliers discount Bills of Exchange drawn on them. For importers who are required to pay for purchases in advance of shipment or on sight of shipping documents, but for cash flow and working capital considerations would like the benefit of credit terms.

What Is It?
A mechanism whereby importers benefit from credit terms that allow them time to turn the goods purchased into cash before having to pay. The exporter is also assured of early settlement. The facility may be made available with or without recourse to the exporter.

How It Works!
1. The exporter/supplier submits a bill of exchange (drawn on the importer or buyer) and shipping documents to the bank. The bill would normally be made payable to the bank and reflect a specific tenor of repayment (as agreed between importer and bank).
2. The Bill is presented to the importer for acceptance of payment.
3. On acceptance, the bill is discounted and the exporter paid.

Documents Needed To Access Facility
If an importer requests the facility, up-to-date financial information will have to be provided. Where the supplier or exporter requests the facility and financial information is not available to the bank, recourse to the exporter is retained, and he must furnish financial information on his own company to confirm his ability to settle the Bill if the importer refuses to do so.

Discounting charges are usually borne by the person requesting the facility.

When You Use It!
For medium to large-scale manufacturers who import large quantities of raw materials, Inventory Financing eliminates the up-front costs.

What It Is And How It Works!
Raw materials of a generic, non-perishable nature are a pre-requisite, as are relevant Customs approvals and storage facility.

Suppliers may be paid by Documentary Letters of Credit with the raw materials consigned to the Bank, or via revolving line of credit. The respective drawing will be repaid in accordance with loan arrangements. These are usually linked to manufacturers' production and collection cycles, so that payments are linked to cash flows generated by the raw materials.

When You Use It!
For importers who prefer to purchase plant and equipment from annual business earnings and who have good net cash flows.

What It Is And How It Works!
This form of financing allows importers to confirm payment to foreign suppliers for equipment and machinery and to structure repayment to suit the specific cash flows of their business. It is particularly beneficial to importers who have cyclical experiences in their annual trade patterns and need to match payment obligations to the timing of receipts from sales.

Once capital goods purchases are identified, therefore, the equipment manufacturer is provided with a guarantee of payment if the particular piece of equipment is standard in nature. The Bank would then make payment against shipment and establish a specific facility to be repaid under the prearranged terms.

The use of separate Capital Goods Trade Financing is particularly beneficial in that it avoids the congestion of overdraft facilities with equipment purchases, which is very often the case. This leads to over-limit situations which introduce administrative burdens and unnecessary penalty interest charges.

What It Is And When You Use It!
For exporters who want to remain competitive and grow their business by offering importers credit terms and at the same time stay liquid by discounting their accounts receivable.

This Is How It Works:

Once the shipment is dispatched, the exporter presents the shipping documents including the Bill of Exchange to the bank.

The bank then forwards these documents to the importer's bank, which is instructed to release the documents only on acceptance of the Bill of Exchange.

The accepted Bill of Exchange is then returned to the exporter's bank for discounting whereupon the exporter is paid the face value of the Bill less the associated finance charges.

Where the exporter does not wish to retain the credit risk on the importer, non-recourse discounting may be accommodated i.e. the exporter will not be liable for non payment by the importer. This would be dependent on the availability of financial information of the importer and other satisfactory credit references. If the importer is found to be sound and likely to service credit obligations on time, the bank may discount the bill without recourse to the exporter.

What It Is And When You Use It!
The Bank can discount the exporter's foreign invoice and advance all or part of the value of that invoice once the goods have been shipped and an acknowledged invoice is presented.

This facility allows the exporter to extend favourable credit terms to buyers at rates of interest which may be far cheaper than those available in the importers' countries.

In cases such as non-recourse discounting of foreign payables and receivables, Republic often extends trade financing facilities without additional security as reliance is placed mainly on financial standing and creditworthiness of the importer or buyer.

Should you require any additional information, please contact the Trade Finance Department

Bills for Collection Republic Bank Limited processes and presents shipping documents for export orders directly to the Foreign Bank / importer on behalf of the local client (the exporter). This is done on a same-day basis to facilitate prompt payment/collection of proceeds.

Foreign Currency Accounts Accounts are available in all major currencies. These attract competitive rates of interest and protect against exchange rate movements of the G$ (Guyana dollar) and the respective currency.

Electronic Funds TransferInternational payments can be made or received via the S.W.I.F.T. network which gives the advantage of rapid, secure and reliable transmission of funds.